There Are Two Unit Roots and Strong Mean Reversion in U.S. GDP per Capita
We have:
- highly-persistent shocks to the long-run level of GDP/Pop
- highly-persistent shocks to the long-run growth rate of GDP/Pop
- short-run transitory shocks to the level of GDP/Pop driven by changes in labor and capacity utilization
Univariate ARIMA just does not cut it as a description…
